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HF3954 (Legislative Session 94 (2025-2026))

Tax refunds; overtime income tax subtraction provided, Minnesota child tax credit expanded, onetime expansion of property tax refunds provided, and new fifth tier individual income tax rate established.

AI Generated Summary

Purpose

Explain how the bill aims to change Minnesota tax rules to provide relief in some areas (such as overtime income and property taxes) while also adding a higher income tax rate and expanding credits for families.

Main Provisions

  • Overtime income subtraction: The bill creates a subtraction from Minnesota taxable income for the amount of qualified overtime compensation that is deductible under the Internal Revenue Code (specifically referenced as a deduction under section 225). This means some overtime pay would be exempt from Minnesota income tax.

  • Minnesota child tax credit expansion: The bill expands the Minnesota child tax credit, increasing support for families with children.

  • One-time expansion of property tax refunds: The bill provides a temporary increase in property tax refunds to give property taxpayers some relief.

  • New fifth tier income tax rate: The bill establishes a new fifth tier of the individual income tax rate, effectively creating an additional tax bracket for higher income levels.

  • Statutory amendments: The bill would amend Minnesota Statutes by:

    • Adding Subdivision 40 to section 290.0132 to implement the overtime income subtraction.
    • Adding or updating subdivisions in section 290.06 (including 2d and 2c) and in section 290.0661 (subdivisions 3 and 7) to reflect these changes.
    • Referencing amendments in Minnesota Statutes 2025 Supplement to section 290.06 (subdivision 2c) and other related provisions.

Significant Changes to Existing Law

  • Creates an overtime income subtraction, altering how overtime pay is taxed at the state level.
  • expands the Minnesota child tax credit, broadening eligibility or benefit amounts.
  • Provides a one-time boost to property tax refunds, offering temporary financial relief to property owners.
  • Introduces a new fifth tax bracket, increasing the top marginal tax rate for higher earners.
  • Requires specific statutory updates across multiple sections of Minnesota tax law (290.0132, 290.06, 290.0661) to implement these changes.

Potential Impacts (Overview)

  • Taxpayers who earn overtime pay could see lower Minnesota taxable income due to the subtraction, potentially increasing take-home pay.
  • Families with children may receive larger credits, lowering after-tax costs or increasing family support.
  • Property taxpayers could receive extra relief this year through a one-time refund expansion.
  • Higher earners may face higher tax liability due to the new top tax rate.
  • Overall fiscal effects depend on how the new rate thresholds, credit amounts, and refund expansions are set in the final law.

Implementation Notes

  • The exact amounts, thresholds, and effective dates are not specified in the provided text; these would be defined in the enacted version of the bill and the corresponding administrative rules once enacted.

Relevant Terms

  • overtime income
  • subtraction
  • qualified overtime compensation
  • Internal Revenue Code
  • Section 225
  • Minnesota child tax credit
  • property tax refunds
  • fifth tier income tax rate
  • Minnesota Statutes 2024 290.0132
  • Subd. 40 (Overtime income)
  • 290.06 subdivision 2d
  • 290.06 subdivision 2c
  • 290.06 subdivision 3
  • 290.06 subdivision 7
  • 290.0661 subdivisions 3
  • 290.0661 subdivisions 7
  • Minnesota Statutes 2025 Supplement

Bill text versions

Actions

DateChamberWhereTypeNameCommittee Name
March 05, 2026HouseActionIntroduction and first reading, referred toTaxes

Citations

 
[
  {
    "analysis": {
      "added": [
        "Subd. 40: Overtime income subtraction referencing the Internal Revenue Code."
      ],
      "removed": [],
      "summary": "Adds Subd. 40 to Minnesota Statutes 2024 section 290.0132 establishing an overtime income subtraction linked to the Internal Revenue Code.",
      "modified": [
        "Amends §290.0132 by adding a new subdivision."
      ]
    },
    "citation": "290.0132",
    "subdivision": "Subd. 40"
  },
  {
    "analysis": {
      "added": [
        "Reference to §290.06 Subd. 2d in the context of the tax-related amendments."
      ],
      "removed": [],
      "summary": "References Minnesota Statutes 2024 §290.06 Subd. 2d as part of the bill's amendments.",
      "modified": []
    },
    "citation": "290.06",
    "subdivision": "Subd. 2d"
  },
  {
    "analysis": {
      "added": [
        "Reference to §290.0661 Subd. 3-7."
      ],
      "removed": [],
      "summary": "References Minnesota Statutes 2024 §290.0661 Subdivisions 3 through 7 as part of the bill's proposed changes.",
      "modified": []
    },
    "citation": "290.0661",
    "subdivision": "Subd. 3-7"
  },
  {
    "analysis": {
      "added": [
        "Reference to 2025 Supplement §290.06 Subd. 2c."
      ],
      "removed": [],
      "summary": "References Minnesota Statutes 2025 Supplement §290.06 Subd. 2c as part of the bill's amendments.",
      "modified": []
    },
    "citation": "290.06",
    "subdivision": "Subd. 2c"
  },
  {
    "analysis": {
      "added": [
        "Links Minnesota's overtime income subtraction to IRC Section 225."
      ],
      "removed": [],
      "summary": "Federal reference: section 225 of the Internal Revenue Code used to determine the overtime income subtraction referenced in Minnesota Statutes.",
      "modified": []
    },
    "citation": "Internal Revenue Code §225",
    "subdivision": ""
  }
]

Progress through the legislative process

17%
In Committee

Sponsors

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